The SEC oversees FINRA, which is charged with regulatory oversight of all securities broker-dealers conducting business with the public in the United States. In light of recent events in the financial markets, the SEC and FINRA have faced questions about their oversight roles. The Dodd-Frank Wall Street Reform and Consumer Protection Act required GAO to study SEC’s oversight of national securities associations registered under section 15A of the Securities Exchange Act of 1934, a provision which applies only to FINRA. GAO recently released the required study which examines:
- how the SEC has conducted oversight of FINRA, including FINRA rule proposals and the effectiveness of its rules, and
- how the SEC plans to enhance its oversight of FINRA.
The GAO stuffy recommends that:
- the SEC should encourage FINRA to conduct retrospective reviews of its rules and establish a process for examining FINRA’s reviews, and
- the SEC should follow all elements of a risk-management framework in developing its future oversight plans.
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